Bulgaria vs Nord Stream 2: Set the priorities right

Bulgaria will not be signing a letter of opposition to the Nord Stream 2 project, a planned expansion of the existing Nord Stream gas pipeline between Russia and Germany through the Baltic Sea, the country’s prime minister Boiko Borissov told reporters on 29 November. A few days earlier, media reports announced that ten EU member states from Central and Eastern Europe (CEE) – Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Poland, Bulgaria, Romania and Slovakia – would be sending a letter to the European Commission asking that the project come under the closest regulatory scrutiny due to it jeopardizing the EU’s supply diversification plans and Ukraine’s geopolitical position.

Although Bulgaria had been listed as one of the ten signatories to the document, it appears that Sofia was the quickest to pull out of the initiative so far. Apart from Mr Borisov’s statement to the media, there has been no official confirmation from any relevant institution in Sofia yet.

All this said, a quick analysis of the situation should give us the following points to consider:

The letter represents a rare act of unity including almost all member states from CEE and Greece.

Even countries like Hungary, the Czech Republic, and Syriza’s Greece, known to maintain closer energy ties with Russia, seem to be backing the initiative at this point.

All of Bulgaria’s gas comes from Russia via Ukraine.

Mr Borissov’s government has been publicly speaking about “diversification of supply” and “energy efficiency” being its priority.

In this respect, Bulgaria’s position on this developing issue, expressed by Mr Borissov in Brussels, raises some questions on whether Sofia is not getting its energy priorities wrong.

In a few words, Nord Stream 2 is seen by many as yet another monster project, conceptualized by Gazprom, aiming to deliver natural gas to Germany, its main market in the EU, while effectively reducing the geopolitical importance of Ukraine as a transit country. Moreover, the project may harm the negotiating positions of the CEE member vis-à-vis Gazprom by stripping them of their transit status. Lastly, Nord Stream 2 hardly fits the Commission’s vision on the future of the EU’s energy diversification and energy security.

The reasons behind the reaction of the CEE states in alarming the Commission with their concerns should be quite straightforward to see. In this sense, Bulgaria makes no exception.

Nord Stream 2 is no way aligned with Bulgaria’s interests. One can recall that in December 2014 Gazprom cancelled South Stream, its major pipeline projects on the South European axis which was to pass through Bulgarian territory, and replaced it with Turkish Stream. Bulgaria was a stakeholder in the South Stream pipeline unlike the Nord Stream one.

Today the hopes of Mr Borissov probably go with an eventual refurbishing of the South Stream initiative after Turkish Stream’s realization becomes less probable amidst the deteriorating relationship between Turkey and Russia. It is important to note that Bulgarian authorities have not received any official confirmation of South Stream’s cancellation from the Russian side to this date.

The problem, however, lies in the fact that such hopes show how ill-conceived and short-sighted Sofia’s energy policy calculations may be.

Mr Borissov probably sees the problem to be in Ukraine and its constant gas squabbles with Russia. And yet, it is difficult to see how avoiding the country as a transit route and jumping onto projects like South Stream, Nord Stream, Eastring, Turkish Stream, etc. will solve Bulgaria’s main problem – its 100% dependency on gas supplied from a single source. Imagine a scenario under which Bulgaria receives access to another source of gas supply. Just the mere availability of this source increases the country’s negotiating position and enables the options for better pricing and contract terms even from the primary supplier.

Mr Borissov’s government has pushed ahead with the idea of diversification of supply for some time since South Stream’s cancelation. A lot has been said, but little has been done. The European Commission has been encouraging Bulgaria to build gas interconnections with its neighbors as a way to enhance the flexibility of its gas infrastructure by enabling reverse flows and options for LNG supplies through terminals in Greece.

After the cancellation of South Stream, Mr Borissov introduced the idea of a “gas hub” on Bulgarian territory where gas would be traded on market terms upon entry. He has ever since insisted that the origin of this gas does not matter as long as it is traded in accordance with EU rules. However, the issue here is that a “gas hub” requires as a prerequisite an adequate gas infrastructure, which Bulgaria still does not have. Also, it is unclear how this “gas hub” idea is related to the expansion of the Nord Stream pipeline. If one would see a connection, it would not be a positive one since Nord Stream’s combined capacity upon completion will eventually render any southern projects (even through Bulgaria) pointless.

Borissov’s political calculations may include a tit-for-tat exchange of support between Berlin and Sofia, but that would be an erroneous overestimation of Bulgaria’s influence and standing in the EU. Alternatively, his actions may be motivated by reluctance to go against the interests of Russia, Bulgaria’s main energy resource supplier, and Germany, the country’s main export partner and important source of investment.

Even if this may be the case, Bulgaria may stand to lose more due to a loss of reputation among the CEE countries, a region which Bulgaria should strategically engage more with rather than alienate. The country has been traditionally looked at with a suspicious eye by other EU members due to its elites having long standing links and dependencies to certain circles in Russia. Mr Borissov himself has attempted, without much consistency, to change this image and show that his country is a committed and loyal member of the EU.

Moreover, CEE member states still do not have the same weight within the EU political architecture compared to the old founding members. This rare act of unity in trying to protect their interests together should give a sign to the richer member states that CEE cannot be a trading coin. Bulgaria is the poorest EU member and instead of succumbing to pressures from Berlin or Moscow it should pro-actively engage with the rest of the CEE countries in asserting common interests. It should come as no surprise if next time Sofia would not get invited to attend a major CEE summit as a result of its Byzantine maneuvering.

Instead of trying to balance off the interests and approaches of external players, Bulgaria should focus on a couple of priorities:

It should actively engage in cooperation with other stakeholders in stabilizing Ukraine and helping it reform its gas sector and infrastructure rather than bypassing the country.

It should build its small scale interconnectors with Serbia, Greece, Romania, and Turkey.

It should welcome the Commission’s efforts to diversify sources along the Southern Gas Corridor, including LNG in Greece and gas from Azerbaijan via Turkey

It should invest more into modernizing the aging gas infrastructure

It should reform its messy energy sector in line with the Third Energy Package

Paradoxically, with his statement in Brussels this Sunday, Mr Borissov made the situation look like the Commission via the Energy Union iniatiative is a better advocate of Bulgaria’s strategic interests in the energy field than his own government. Bulgarian politicians should understand that the EU enables countries of lesser weight to multiply their projected influence by cooperation with peers rather than constantly looking to accommodate national policies to those of the heavy-weight.